Efficiency in Health Care Systems Essay

Its without doubt that there are countless ways to define efficiency in the health care system. The different structures of the health care systems around the world give rise to discrepancies in the definitions present. Yet such definitions all share common elements. Hence a unanimous statement of what efficiency is should be adopted to allow the fair evaluation of health care systems internationally. Efficiency should be simply defined as the balanced relationship between the inputs to health care and the maximized outputs that are generated from such inputs.

Efficiency can be split into three broad categories, operational efficiency, allocative efficiency and administrative efficiency (Elizabeth A. McGlynn, et al. 2008). With this definition, it is necessary to outline what constitutes towards input and what constitutes towards output, namely public and private funding and their timely and appropriate use towards building well equipped hospital environments, exploiting recent advances in technology and training high quality staff. Here output refers to the well-being of patients; output refers to the increase in benefits that patients receive as a result of inputs.

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Such results can be partly quantified by a country’s life expectancy at birth, rate of adult and infant mortality and disease prevalence. There are a plethora of common definitions for efficiency but they can be discounted for being too specific, hence losing their ability to be applicable to all situations. An example of such a definition states that efficiency can be defined as “Avoiding waste, including waste of equipment supplies, ideas and energy” (Institute of Medicine 2001). This is a clear and precise interpretation, but waste is not the only factor contributing towards a lack of efficiency.

The ill use of resources, leading to the investment of time and money into inappropriate ventures that are not in demand at the time, such as investment in technology when the training of physicians is of a higher importance, also corresponds to inefficiency. Another definition indicates that efficiency is achieved when “Health care resources are being used to get the best value for money” (Palmer and Torero 1999 p. 318:1136). This definition brings with it an element of vagueness. What is an objective view of the “best value for money”? Is obtaining money wise results the only element that needs to be considered?

Definitions like the aforementioned do act as guidelines towards how efficiency can be measured but a more general version, such as the one that is mentioned here would provide clarity and minimize confusion. Efficiency should hence be defined as the maximization of output given input into health systems. Such a definition encompasses a range of possible elements as “output” but essentially, the amount of output is reflected in the overall wellbeing of the general population and the increase in benefits that they can reap if a different methodology was adopted.

Rising health care costs, which in part is escalated by an aging population accentuates the need for an efficient health care system. Translating public and private funds into outputs such as better hospital and aged care center environments, increasing hospital capacities as well as decreasing patient to physician ratios and hence decreasing waiting times are examples of the matching of input and output. The difficulty in measuring efficiency across countries means that a clear definition is a necessity, with such a definition, a series of guidelines can be developed to rate and compare countries’ health care system.

Evaluation of a country’s health care system can be achieved through analyzing three main categories of efficiency that is operational efficiency, allocative efficiency and administrative efficiency. Operational efficiency refers to waste of resources during the production process and the delivery of services. Examples of operational inefficiency include the duplication of services; for example the repetition of clinical tests, inefficient processes; such the unavailability of requested test results, overpriced inputs; physicians overcharging for services that nurses can provide and errors such as defective supplies (Hurley et al. 009 p. 18). An OECD study conducted in 2007 which compared unit costs found there was a potential for the reduction of costs. For countries such as Australia, France, Sweden and the US, such costs could be reduced by 5-48%. For the same output, it was estimated that Australia had to the potential to reduce 42% of costs. In terms of duplication of services, Australia’s rate of duplicating services was at 12% in 2008 compared to that of other countries such as 18% in Germany, 20% in the US, 10%, 11% and 7% (Survey of Sicker Adults 2005, 2008) in Canada, New Zealand and the UK, respectively.

This shows that Australia is considered to be an average performer in this respect but seeing that there are such margins, Australia and other countries such as the US can still increase their efficiency. With the prevalence of test results being unavailable, 2008 results show that Australia was again an average performer with 17% of tests or medical records not being available at the time of assessment of sick patients. Here, Australia was topped by the Netherlands, Germany and the UK whom had 11%, 12%, and 15% (Survey of Sicker Adults 2005, 2008) of cases respectively.

Human error and related adverse events are also of significance towards affecting efficiency with Australia being outperformed by the US by 9. 3% of admissions. The occurrence of adverse events in the UK, New Zealand and Denmark hovered around 10 percent (Hurley et al. 2009 p. 21). In terms of operational efficiency, many of OECD countries still possess the potential to perform better. Allocative efficiency refers to the ability to appropriately allocate resources to equally performing but less costly clinical services.

Elements that constitute towards allocative efficiency are for example ranking diseases based on priority, investing in the prevention of disease and hence minimizing preventable hospitalizations. Such efficiency can be evaluated through output such as medical staff training, hospital bed availabilities and prevalence of technology in hospitals. Health spending in Australia accounted for 9. 1% of GDP in 2009-2010 (OECD 2012) which is lower than the average of 9. 5% in other OECD countries. Percentages of GDP spent in the US and other European countries include US(17. %), Netherlands (12. 0%), France and Germany (11. 6%), and Switzerland (11. 4%). Such spending in Australia translated to 3. 1 physicians per 1000 population which coincided with the OECD average and 10. 1 nurses per 1000 population which was higher than the OECD average. These figures show that for a less than average spending on health care, similar numbers of doctors and more nurses were trained. This implies that there is still room for an increase in efficiency in relation to the countries that are spending more but producing less.

Statistics show that acute care hospital beds have fallen for most OECD countries. The ratio of beds to patients in 2009 for Australia and for the OECD average was 3. 4 per 1000 population. An explanation for such decreases may be due to the fact that the average length of stay in hospitals has been decreasing and the number of same day surgical operations has been rising. Over the past two decades, there has been an evident increase in the number of diagnostic machines being utilized across hospital environments in OECD countries. Machines such as Medical Resonance Imaging (MRI) units have seen an increase n Australia from 0. 6 per million in 1990 to 5. 6 per million in 2009. The accentuated use of technologies internationally is further emphasized through the OECD average of 12. 5 per million in 2010. With regards to other devices such as CT scanners, Australia was found to have 42. 8 scanners per million which is much higher than the international average of 22. 6 (OECD 2012). On the analysis of Australia’s input to output, much funding is spent towards training more nurses and equipping care centers with the most advanced medical technology.

With respect to other OECD countries, this is evidence that Australia is opting to resort to cheaper alternatives while maintaining the production of a high level of care. The investment into diagnostic technologies also suggests a high level of efficiency as functioning diagnostic tools contribute towards early detection and preventative care. What is particularly concerning though is the decrease in the ratio of beds to patients which, together with a lack of emergency staff, may be constituting to wards the cause of recent complaints over extended waiting times in emergency rooms.

Such a problem has been exposed to substantial media coverage and is topic of dispute and concern. Improvements in efficiency can lead to a decrease in such concerns. Efficiency should also be reflected in outcomes such as life expectancy, disease rates and mortality. Statistics gathered show that Australia’s life expectancy in 2010 lay at 81. 8 years on average while the OECD average was at 79. 8. Australia was also ranked fifth, following Japan, Switzerland, Spain and Italy, in this respect.

This indicates the possibility of an efficient and well functioning health care system, translating into benefits for the general public. An increase in efficiency could help to control future spending by an average of around 15% per capita. Hence there is still room for improvement in terms of investing in cost efficient methods for health care. An area in which most OECD countries tend to perform poorly in is obesity rates, which has been exhibiting an increasing trend. In 2007, the rate of obesity in Australia was 24. 6% compared with that of the US(33. 8%) and Mexico (30. %). Australia is slightly more capable in the control of obesity rates but this percentage is still alarming. Obesity, which can be minimized through preventative care, can lead to a series of health problems with varying levels of severity. These health problems have the potential to cause severe stress on the health system in the future and resources should be directed towards this area of preventative care. Additionally, research shows that raising the number of general practitioners beyond a certain equilibrium point, doesn’t decrease mortality rates (Hurley et al. 009 p. 39). This emphasizes the need for allocative efficiency in which resources are used in the most important of places. Administrative efficiency is also another respect of efficiency that needs to be considered. Administrative costs are overhead costs that may feature large amounts of waste. Examples of administrative activities are billing, calls processing, scheduling. In 2006-2007, private and public health insurers in Australia spent over 12% of expenses on administration costs. Figures show that Australia has a relatively low percentage(2. %) of national health expenditures spent on health insurance administration costs compared to countries such as the US (7. 5%) and France( 6. 9%). Yet Australia still falls behind Japan (2. 3%) and Finland (1. 9%) (Hurley et al. 2009 p. 46). This figures show that Australia spends a relatively smaller amount but caution needs to be taken since there are a plethora of reasons as to why this may be the case; for example private health insurance may play a smaller role in Australia. On the whole, caution should be taken when considering comparisons through statistical figures.

The complexity of the health care system of each country and the difference in demography of each country implies that it is necessary to take care when interpreting results. Cost and inflationary pressures may translate to different outcomes in different countries. These all constitute towards the difficulty of measuring and comparing efficiency. Having a well articulated definition for efficiency is crucial for different systems across the world to be evaluated, judged and hence improved.

The concept of efficiency could be greatly simplified if it was broken down into distinct parts such as operational, allocative and administrative efficiency. It was seen that Australia fairs strongly on a global scale in the midst of other developed countries. Yet each country has its own focus and definition for prioritizing the different sectors of health care and hence caution must be taken in the evaluation of the state of each individual system. With regards to operational efficiency, countries including Australia, the US, Germany and New Zealand, are characterized by a large amount of waste.

In terms of allocative and administrative efficiency, OECD countries tend to perform at a higher level. Overall, most OECD countries are achieving a high level of efficiency, with inputs translating to a large output but there is still room for improvement and an even higher level of efficiency can be achieved, ultimately leading to higher life expectancies at birth, lower mortality rates and higher survival rates. Word Count: 2054 Elizabeth A. McGlynn et al. 2008, Agency for Health Care Research and Quality, Health Care Efficiency Measures, U. S. Department of Health and Human Services

Hurley et al. 2009, The Australian Health Care System: The Potential for Efficiency Gains, Australian Government National Health and Hospitals reform commission. Page 18 2005 and 2008 Commonwealth Fund International Health Policy Survey of Sicker Adults 2005 and 2008 Commonwealth Fund International Health Policy Survey of Sicker Adults Hurley et al. 2009, The Australian Health Care System: The Potential for Efficiency Gains, Australian Government National Health and Hospitals reform commission. Page 21 OECD 2012, Health Data http://www. oecd. org/els/health-systems/BriefingNoteAUSTRALIA2012. df [available] Hurley et al. 2009, The Australian Health Care System: The Potential for Efficiency Gains, Australian Government National Health and Hospitals reform commission. Page 39 Hurley et al. 2009, The Australian Health Care System: The Potential for Efficiency Gains, Australian Government National Health and Hospitals reform commission. Page 46 Palmer S, Torgerson DJ. Definitions of efficiency. BMJ. 1999; 318:1136. Institute of Medicine 2001, Crossing the Quality Chasm: A New Health System for the 21st Century, National Academy Press, Washington DC

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